Things to Consider BEFORE 30 June
With less than two weeks until June 30, the clock is ticking if you want to get the biggest tax deduction possible and get it fast.
Property-related expenses paid for in the next couple of weeks gives you the chance of getting a chunk of your money back within a couple of months, rather than have to wait more than a year because you left the spending until after June 30.
Here are a few key things to consider prepaying or spending money on now before the calendar and clock ticks over to July 1.
Repairing a dodgy door, fixing a broken fence or adding a fresh coat of paint are immediate tax deductions for property investors in the financial year they incur the expense.
However, the ATO says the deductions must relate to wear and tear or other damage. Capital improvements such as big renovations will have to be written off over several years.
Depending on your tax situation and financial resources, you can get a double-whammy tax deduction by prepaying one year’s worth of investment loan interest in advance.
This can be on top of all the interest you’ve paid in the current financial year, so may be a handy way to offset capital gains elsewhere.
But remember that unless you keep prepaying interest in future years, you’ll be stuck with a year with no interest deduction to offset your rental income.
Have you moved this year? You cannot claim a whole year of interest on your investment if you lived in it for part of the year.
Terri Scheer Insurance executive manager Carolyn Parrella says you cannot claim a whole year of interest if you personally used the property for part of the year.
“Landlords may be unaware that interest can only be claimed when the property is available for rent,” she says.
If you’re going to prepay your property’s insurance policy, now is the time to do it.
“Property investors can usually claim their landlord insurance premium as a tax deduction but this is often overlooked,” Ms Parrella says.
It’s also worth checking your insurance now too, she says. “Some landlord insurance policies provide cover for professional fees incurred as a result of an ATO tax audit relating to investment properties. A standard home and contents insurance policy won’t cover landlords for the specific risks associated with property investing.”
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If you have an investment property far from your home, this is your last chance to claim a deduction for the travel costs incurred in inspecting the property. Last month’s Federal Budget has banned tax deductions for property investors’ travel expenses from July 1.
The Final Say…
It’s unwise to spend money just to get a tax deduction, because you only get your marginal tax rate — usually between 34.5 and 47 cents in the dollar — back from the taxman, so you are still losing money.
But timing it right can deliver a tasty financial treat in July or August.
Originally Published by Anthony Keane of The Advertiser on the website www.adelaidenow.com.au